tv On the Money NBC October 6, 2014 12:30am-1:01am PDT
hi, everyone, welcome to "on the money," i'm becky quick. our conversation with the world's greatest investor, what warren buffett knows about the stock market. >> i have no idea what the stock market is going to do. >> but he does know a good deal when he sees one. we'll meet the man who negotiated with buffett seven years before selling. plus, the strong jobs number and what it means for your money. how much life insurance you should have, what kind, and when should you buy, this is "on the money." >> this is america's number one financial news program, "on the money," now becky quick. >> here's a look at what's
making news. america's unemployment rate now stands at a six-year low. the september jobs report shows the economy added 248,000 new jobs, that was better than expected. the unemployment rate is at 5.9%. that is the lowest level since july of 2008, and numbers for the two previous months were also revised higher. that's sent stocks open on friday after a october that wiped out all the gains of a third quarter. russell 2000 fell 10% from its recent high. investors in the u.s. were disappointed after the european central bank didn't do as much as hoped. ecb president mario draghi says the bank will buy private sector bonds last month, but there was speculation draghi would begin an even more aggressive policy. imagine this, your net worth is somewhere between $1.1 and $2.3 million. you make a hefty payday of $250,000 every time you give a
speech. you'd think you'd have no trouble at all refinancing your mortgage. not at all, at least if you are ben bernanke. bernanke told that story during a speech last week, and get this, it wasn't a joke. he said it illustrated his point lending standards may be just a little too tight these days. volatility returns to markets. a new quarter begins, and the jobs report is out, as well. what does it mean to your money? joining us now, liz ann sonders, chief investment strategist at charles schwab. thanks for being here. >> thanks for having me. >> jobs numbers were better than expected, 248,000, unemployment rate falling to 5.9%. what does it tell you? >>9=q1 a good number. a bit of a goldilocks numbers because one of the eternals of the number that could have potentially caused problems is if there was a big pickup in wages, thinking about inflation and fedf'm policy, so kind of a good as it gets and some of the reason for the decline in the
unemployment rate was separate from labor force participation, which some see as a negative reason the unemployment rate's coming down. a lot of people found work and a lot less people were unemployed. it was pretty good. unemployment claims have been telling you we've got strong numbers and a nice upwardgua revision to august numbers, too, i think that re-enforces the idea august was an aberration. >> these may have been goldilocks numbers, but the markets seem to have been much more volatile, there's a lot more nerves coming from investors. are they right to be nervous, what do you think when dips like this happen? >> as you know, we've been very optimistic for this entire bull market, and in august i got a little bit more cautious just in the short-term, and there were a number of factors contributing to that. sentiment conditions, which i pay close attention to, started to elevate in terms of optimism, and the internals of the market, the percentage of stocks
reaching new highs started to narrow a bit, so one of the ways to think about soldiers not keeping up with the generals, then it's also midterm election year and that tends to bring some volatility in advance of the elections. so the good news is, is that this is based on history, not a forecast, every single time th/ rally thereafter has been quite strong, so using history as a l4 guide, you get a selloff, but it's a great buying opportunity. and i think in general, the pattern will look like that, not to mention the fact we're dealing with within, call it nine months, of the first rate hike and that tends to bring volatility. >> you don't think we've necessarily seen the highs of the year, though? >> i think a lot depends on what happens right now. if we had i guess about 4.2%, 4.3% drop in the market from the all-time high to the recent low, maybe that was enough for the cycle, but if we had something more akin to a full blown
correction, then it's going to be harder to climb back to the prior highs. >> we did have disappointment this week, investors had been hoping mario draghi would say something, the ecb would be stepping in with more concrete measures. they didn't get that. is that heart breaking at this >> you know what's interesting, there's so much desire for draghi to really step in and do sort of u.s.-style quantitative easing. my concern is, number one, they have sort of one foot on the gas and one foot on the brake, so they are providing all this liquidity to the banks, investors want them to provide even more, but at the same time they've got stress tests on the banks, so they are saying here's the money, banks, but be careful how you lend it. >> we did the same thing. >> i think that was a bit of a problem, but also you can provide as much supply as you want, but if you want lending to pick up, you need loan demands, too, not just on the supply side and i think the problems in
europe are so deep and reform is such a requirement, i'm not so sure the demand side is going to pick up. so i think the structural problems in europe are a bit deeper. >> you think u.s. stocks are the most attractive place to be? >> i do, i do. given some natural volatility, still think the u.s. is the place to be and i think that's one of the key reasons why the dollar is doing so well. >> what do you tell people beyond just u.s. stocks? we've seen fluctuations with the dollar because of these changes, seen the dollar run up. it sounds like you think we may have seen what we're going to see out of the run. >> i think we're in a long-term multiyear bull market for the dollar. doesn't mean it goes straight up like the last 11 weeks or so, but i think the reasons why the dollar are doing well are different than the reasons it did well during the financial crisis. it was flight to safety in an environment the world was falling apart. now i actually think there's increased confidence in the dollar as a currency, in the nation it represents, in its
reserve currency status, all of which are good things and as a consumption economy, which we ñ huge positive, so i think good reasons why the dollar is doing well this time, good for our economy and stock #; but that doesn't mean it goes straight up forever. >> bottom line, you would tell people to buy on tips you like u.s. stocks? >> we also do like emerging markets. i think you have to be or should be a little more selective within that index. you're going to have a wider spread between the winners and the losers, but i still think in the medium term u.s. probably outperforms but i think you have an opportunity there, as well. >> liz ann, thank you so much for joining us. >> thanks. up next, we are "on the money," the second richest man in america, berkshire hathaway ceo warren buffett on his investment, cars, coca-cola, and newspapers. >> you wouldn't necessarily say that's an investment for everyone? >> i think it's an investment for hardly anyone. later, what's your life
♪ he's the man that many call america's greatest investor, oracle, warren buffett is here on set with us. warren, thank you so much for being with us today. >> fun to be here. >> there are a lot of people at home watching the stock markets who have gotten very nervous by some of the dips they've seen recently, people wonder if things are topping out. what advice would you give to people sitting at home? >> well, i have no idea what the stock market is going to do next week, next month, or next year, i do know it's going to be higher ten years from now. if you own your stocks2l
investment, just like you'd own an apartment house or farm or anything, look at them as a business and you have a group of american businesses and you're going to own it for ten years, you're going to do fine. if you're going to buy and sell based on news or something your neighbor tells you, you're probably not going to do well, so find a good bunch of businesses and hold them. >> and that's what you've been doing for decades and decades and it's paid off. >> been doing it all my life, yeah. you will not make money trying to buy and sell stocks. daily or weekly. >> you may not know exactly what's going tosh!happen to the market tomorrow, but you have a good idea about what's happening in the economy. you know that fro&(mg:ah burli northern, which is a good read on the economy, to a company like american express. where do you think we're qr÷ h? >> well, the economy since the fall of 2009, that's five years now, has been increasing at a pretty steady rate. people have gotten more enthused or more depressed, all these
sorts of things we've heard, but it's been a pretty steady increase and it doesn't accelerate a lot, it doesn't decelerate a lot, and what we see now is exactly what we've been seeing for five years, an increase, not at a rate that gets people all excited, but -- i think we'll be seeing that a year from now. >> in terms of what we've seen from some of the companies that you own big stakes in, coca-cola this week said it would be changing the package that it pays its executives in terms of how they break up and pay them in stock or not so much in oáá stock. you were someone who was a proponent of changing that plan. what do you think of what they've put out? >> i think the compensation committee working with the board has crafted a very, very sensible plan that involves issues of stock more payment in cash, performance-related in both cases, and i think it's a very logical plan and i think
the stockholders are considerably better off than they would have been if the comp committee hadn't done what they did, so i tip my hat to them. >> warren, over the last several years you've bought up about 28 regional newspapers. that's an investment that a lot of people thought what the heck is going on there, that's a shrinking industry. how have those investments paid off for you? >> well, they worked out okay, but absolutely right, it is a shrinking industry, and those papers will earn less money five years from now than they earn now, but we bought them at a price where we've factored that in. so they will be a satisfactory investment, but newspapers are not a place where earnings are going to increase, they are going to decrease, and a lot of papers are going to disappear over time. there's no question about that. >> so you wouldn't necessarily say that's investment for everyone? >> that's an investment for hardly anyone. you've got to buy them very, very, very cheap. >> warren, earlier this year,
berkshire hathaway was listed as one of the worst companies in the country by the human rights campaign, saying it's one of the worst places to work if you are lesbian, gay, bisexual, or transgender. they say you don't have policies that protect employees and make it a safe place for them to work. what would you -- how would you respond to that?w&hc% >> i guess what probably happened, we get surveys all the time on all men and women, you know, you name it, all different kinds of things and we basically don't answer them. we have 75 subsidiaries out there running their businesses, 300,000-some employees and 25 people in headquarters and we do not every time we get a questionnaire go out to 75 and have them go through a lot of work. i would say this, certainly, our managers know how i feel. i'm 100% for full rights in every respect for gay and lesbians, so, but i do not set the policies for the 75
companies. i know what they are at a few of the larger ones and i think they are quite progressive, but i would say i've seen it listed as zero on certain surveys and the reason was we didn't answer the survey. >> this week you also added a new company to berkshire hathaway. you're always looking for a new deal, this time around you brought van tuyl auto group. what lured you? >> well, larry van tuyl talked to me six or seven years ago. i understand the business, and i think that it's a decent business overall and i think the way larry runs it is extraordinary. he has these partners in 78 dealerships, and so hea)[f wor a partner basis, has a terrific record over the years and something we'll own for 100 years. it's the kind of business we can expand a lot because there's 17,000 dealers in the country, and we're buying 78 of them through this means. so we'll get a lot of opportunity to expand this
...we need to break up. is it the biting? cuz i can stop? no! i love you and your show. it's cable. customers are more satisfied with u-verse. switch and we can stay together forever. forever? ow. i'm not gonna lie to you. it's also the biting. break up with cable. choose u-verse tv from $19 a month for 2 years. dad, i know i haven't said this often enough, but thank you. >> thank you, mom, for protecting my future. >> thank you for being my hero and my dad.
larry van tuyl, who is the head of van tuyl automotive group. thank you so much for being here. >> thank you, becky. >> van tuyl was the company started by your father. how was the company started, one auto dealer. >> as a chevrolet dealer in 1955 in kansas city. >> and how did you grow to then 78 companies, 78 dealerships over that time? >> well, he saw the opportunity that if you grow and develop good people, that you could develop partnerships and go out and acquire additional franchises in different areas. and they were a large ticket item. automobiles are fairly expensive items, so it's one of the last large ticket item franchises available in the country. >> you've been working with the company for over 40 years. >> what made you go to see warren buffett six years ago? >> well, we've had the businesses between my father and myself for 62 years, and my biggest concern was to be able to perpetuate that, and the
model is a great model, the people are great. we wanted to continue the culture of that, and so i looked for something i thought was similar, and there really was only one. and it was berkshire hathaway, so i actually went to see mr. buffett seven, eight years ago in an exploratory get acquainted and confirmed my thinking that our cultures were the same and it would be a great fit for the long-term viability of our business. >> you first visited him seven or eight years ago, did it take you that long to decide that was the right fit? >> took me that long to make sure that i was personally ready to do that. >> you're still staying with the company, though? >> yes, i am. >> the company is now going to be known as berkshire hathaway automotive group. >> that's right. >> how do you feel about the company no longer bearing yours and your father's name? >> well, i think that berkshire hathaway is a bigger name, so i
felt it was the appropriate thing to zpxtdo, and we're very proud to be associated, and we've been in the automotive business forever, so people know who we are, and, again, our people know, you know, what's going on. that's the most important thing to us. >> what do you think about how consumers are doing right now, how willing they are to drop down money for a big ticket purchase like a car? >> business is good. business is good. and we believe it's going to continue to be good. products are great, it's creating a lot of demand, so whether it's gas mileage or technology, so we believe it's going to stay good for quite some time. >> larry, i want to thank you very much for joining us today aw?"ñ sitting down. >> thank you, becky. >> congratulations. >> you bet, thank you. up next "on the money," a look at the news for the week ahead, and investing your time and money in life insuranc finding the right plan to build a financial safety net.
for more on our show and our guests, you can go to our website, otm.cnbc.com and follow us on twitter. earnings are starting to trickle out. young brands monsanto, costco, and pepsi are all reporting. on monday, fortune's most powerful women's summit began. tuesday, consumer credit data. on wednesday, the fed releases minutes from a meeting. friday, the international monetary fund and members of the world bank meet and one of the
world's most coveted awards, the nobel peace prize, the winner of that will be announced. life insurance, it is rarely a topic that consumers like to think about, talk about, or do anything about. recent statistics show that one in four consumers have no life insurance at all and many simply have no idea how much insurance they need or the best place to get it. personal finance correspondent sharon epperson is here to go over what you need to get more adequately covered. >> becky, many americans get life insurance policies through work. the coverage, though, is usually less in different policies. less than half of consumers ages 25 to 64 with household incomes between $35,000 and $100,000 have their own life insurance policies as according to a recent report from the insurance industry group. most consumers in that survey said they were not financially prepared for the death of a family member and would need to make a drastic or significant occurred. >> the biggest mistake they make is not owning enough.
that is the single biggest thing you got to get right, because you don't get a second chance. >> the founder and ceo of accuquote.com, which sells life insurance policies. the biggest step is how much money you need to cover your present and future financial needs. >> i guess that's the question, who does need life insurance? >> basically, if anyone depends on you financially, you need life insurance. that is married couples, parents of young children, and single people caring for an aging parent, but anybody with the responsibility of taking care of someone else needs to think about life insurance. it's also a great way to pass on money to heirs and have that income for them. >> here's the million dollar question, how do you know how much you need? >> what you need to do is really crunch the numbers and seeohp÷ e you stand right now. how much does it cost to run your household, how much does your family need to operate on a daily, weekly, monthly basis? you need to calculate those numbers.
in terms of the death, as well, unpaid medical bills, mortgage debt, and think about future obligations, are you going to pay for your kids' college education, house paid for, those types of financial needs, as well, that may be down the road and figure out the resources you have, your 401(k), ira, social security survivor benefits and emergency reserves you might have. whatever the difference is, that's how much you need. >> sharon, you brought up a good point, most of us who have life insurance have it through work. is that a smart plan or not, because if something happens to the job, the life insurance is gone and you may be a lot older at that point when you're trying to look for life insurance. >> exactly. people don't realize these policies while well covered while they are at work, they are not portable. you may need to buy life insurance on your own. you probably should have some on your own because you never know what's going to happen with your job. people get caught up, okay, i'm going to buy it, but what do i buy and there is term life insurance and permanent life
insurance. term is going to be a lot cheaper than the permanent policy and the term is going to do what it says, cover you for a specific term, a specific period of time. the permanent policy is there for the rest of your life, so while you're paying more in it, it is kind of an investment and insurance product. you're getting a cash value that you may be able to use for other things along the way, but it is something that's going to be there forever and that's what a lot of folks use to pass on and use for estate planning. >> sharon, thank you so much. >> sure. that does it for us today, i'm becky quick, thank you so much for joining me. each week keep it right here, we're "on the money." see you again next weekend. latte or au lait? cozy or cool?
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